A $660 billion 'spending spree' warning for Australian states
Australian state governments are facing a mounting public debt crisis, with a staggering $660 billion in debt projected by 2027. This alarming trend is attributed to a spending pattern reminiscent of the pandemic lockdown era, according to S&P Global's warning.
The credit rating agency highlights a concerning decline in creditworthiness, with the combined cash deficit reaching 16% of revenue in 2025, mirroring the pandemic's peak. This marks the lowest point in 25 years for Australian states' credit ratings.
Martin Foo, an S&P Global analyst, emphasizes the widespread borrowing habit among Australia's smallest states. He notes, 'Some Australian state governments are spending like they're still in pandemic lockdown.'
The warning predicts further delays in post-pandemic fiscal recovery, echoing last year's forecasts. State government debt is projected to triple between 2019 and 2027, reaching a collective $660 billion, or 24% of the state's GDP, excluding the Northern Territory.
Despite the average Australian state government rating remaining at AA+, S&P Global warns of a downward trend. Both New South Wales and Queensland are on a negative outlook for 2026, while the Australian Capital Territory and Tasmania were downgraded to AA' in 2025.
Martin Foo attributes these challenges to common obstacles, including combative public-sector wage negotiations, widespread community demands for entitlement spending, and a reluctance to implement tax increases or economic reforms.
